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Elder Fraud: When Someone You Trust Betrays You

Key Points

Financial exploitation affects many seniors, causing losses of more than $2.9 billion annually.

More often than not, the perpetrator in these crimes is a member of the victim’s own family.

It’s never too early to take steps to help protect yourself from financial exploitation while you are still of sound mind.

Dear Readers,

Lately, I’ve been thinking a lot about all the seniors in this country who’ve been financially exploited. Friends have told me stories about grandparents who’ve been wiped out by fraud, and I’ve also heard from adult children who’ve been cut out of their parent’s will when a new “sweetheart” comes along. I get angry every time I hear these stories.

What makes the situation so alarming is how widespread this problem is. According to a recent Securities and Exchange Commission (SEC) report, between 2.7 and 6.6 percent of seniors are affected by exploitation in any given year.1 They lose at least $2.9 billion annually.2

We’ve all heard about scammers who target seniors with fraudulent “IRS” or “grandparent” calls. But what doesn’t get as much attention are all the times seniors are financially exploited by someone in their own family. In fact, I recently read a study that said that 57.9 percent of the perpetrators of elder financial exploitation were family members.3 That means that seniors are being financially exploited by the people they love and trust most. And unfortunately, family dynamics make these types of crimes so much harder to prosecute or even detect and report.

The dilemma: placing our trust in others

As we age, we become more susceptible to physical or cognitive decline. In fact, one of the earliest signs of cognitive decline is diminished financial capacity, or an inability to manage money.1

If we’re lucky—and aware that we need help—we can turn to friends and family for a hand with our finances. That’s great, when family members act with integrity and put the senior’s best interests first. But it’s not great when an unscrupulous relative decides to take advantage of a senior’s vulnerability. I recently heard a story about a 63-year-old man in Marin County, California, who embezzled more than $180,000 from his 89-year-old mother’s accounts while his mother was suffering from dementia.

There are also high profile cases, like that of Brooke Astor, the New York socialite who died in 2007. She was swindled out of millions of dollars by her son, while she suffered from Alzheimer’s. But it’s not just the wealthy who are at risk. According to the recent SEC report, the poor are even more vulnerable for a number of reasons.1 For example, even in conditions of poverty a senior may have something that an abuser wants: an apartment to live in, equity in a home, or a regular source of income such as Social Security or a pension.

It’s revolting that seniors are being treated this way. What really makes it worse, though, is that so much of this exploitation goes unreported. According to a New York State study, for every case of elder financial exploitation that’s reported to law enforcement, there are another 44 that are not.2

Why family dynamics make this so challenging

I suspect that family dynamics are one of the biggest reasons some incidents of financial exploitation get swept under the rug. When people are victimized by strangers, they report it to the police. But they’re often reluctant to do so when a family member is at fault. Seniors often don’t want to harm someone they love—even if that person is harming them. They may not want their family’s name in the papers and they may be reluctant to report a relative to law enforcement.

If the person who exploited the senior is their child, they may be dealing with difficult emotions and wondering how they could have raised someone who would treat them like this. The senior may be embarrassed about the deception. And sometimes, it’s hard to believe that someone we love and trust would betray us in this way—and we may even doubt whether what we’re seeing is true.

But there’s another kind of family dynamic that also plays a huge role in financial exploitation: when a new “sweetheart” appears on the scene. The elderly—especially if they’re widowed—may feel lonely and crave companionship. The senior might try online dating or be flattered when a new person shows interest. But sometimes, these “sweethearts” aren’t looking for love; they’re looking for a financial bonanza.

The “sweethearts” may try to separate seniors from their children or other loved ones, which is heartbreaking enough. But making it worse, they might also convince the seniors to change their wills, beneficiary designations, and account tenants—cutting out the adult children.

Planning and communication are key

I know it’s horrible to contemplate that a family member or close friend might prey upon your vulnerability in the future. But there are ways you can help protect yourself, which I talked about in another column. One safeguard now available is to provide financial institutions with the name and contact information for a “trusted contact person”—a trustworthy individual at least 18 years old who can be notified on your behalf to help address suspected financial exploitation or diminished capacity, should either situation occur in the future.

I can’t overstate how important it is that you communicate with trusted family and friends —and a financial consultant as well as your estate planning attorney—about your finances. They need to know what you have, where accounts are located, and what your intentions are for your money. The more people who have this information, the harder it will be for one person to exploit you or someone you love.

Shine a light on the crime

Finally, I want to emphasize that financial exploitation of elders is a crime. Even if it’s committed by a loved one, it’s still a crime. I understand that people don’t want to report a family member to law enforcement. I also understand how complex the emotions are around this. But if we’re going to help protect seniors—and our future selves—we need to shine light on this.

If you suspect that your parent or another elderly person is being exploited, you might consider confronting the perpetrator to let them know you’re on to them—but only if it’s safe to do so. If it doesn’t feel safe, alert the police or Adult Protective Services. There are also attorneys and other services that specialize in financial exploitation that can help you figure out how to proceed.

Either way, we need honest conversations about this exploitation. Exposing the truth may be the only way to stop it.

Have a personal finance question? Email us ataskcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries,contact Schwab.

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